In a BMI report sent to Rigzone by the Fitch Solutions team early Friday, analysts at BMI, a unit of Fitch Solutions, revealed that their base case still assumes a preliminary agreement to reopen the Strait of Hormuz by the end of the third quarter.
The analysts warned, however, that their base case recognizes that risks are “increasingly skewed towards a delay into the fourth quarter or beyond”.
In the report, the BMI analysts highlighted that Brent crude has rallied over the past week, “with renewed military exchanges between the U.S. and Iran pushing the September contract for Dated Brent to $98.5 per barrel at the September 2 close, as hopes for a near-term peace deal have faded”. The analysts noted that oil price action remains dominated by developments around the U.S.-Iran conflict.
The BMI analysts pointed out in the report that “significant volumes of crude continue to leave the Middle East despite the Iranian shutdown, the U.S. naval blockade, and continued disruptions in the Red Sea”. They added, however, that estimates of actual flows vary widely, “with U.S. government figures pointing to substantially higher Hormuz throughput than tanker-tracking data”.
Despite the varying reports, the BMI analysts said these flows have helped contain the crude price rally so far, “particularly alongside weaker Asian crude purchases and sustained inventory drawdowns”. They warned, however, that “the buffers are steadily eroding”.
According to the analysts, the “more acute pressures” remain downstream, “especially in middle distillates, as Ukrainian strikes have disrupted over 40 percent of Russia’s refining capacity, Russian fuel export restrictions have been extended to September 30, and refinery output remains constrained across Asia and the Middle East”.
“Diesel markets are flashing increasingly severe signs of stress, with global exports estimated around 30 percent below pre-conflict norms and little spare capacity available elsewhere to offset the loss,” they added.
The analysts went on to reveal in the report that they are holding on to their forecast for Dated Brent to average 86 per barrel in 2026 and $71 per barrel in 2027, “assuming a preliminary U.S.-Iran deal is reached in the third quarter and regional flows normalize through the fourth quarter”.
They warned that a delayed deal, renewed high-intensity conflict, or persistent downstream outages would present meaningful upside risk to their outlook.
In a market quick take posted on its website on Friday, Saxo Bank highlighted that crude was trading steady after a three-session rally of around nine percent.
“The U.S.-Iran conflict around the Strait of Hormuz continues to keep supply risks and the geopolitical risk premium elevated,” the bank warned.
“Brent has risen almost 60 percent this year, while refined products such as diesel have seen even steeper gains amid the Middle East conflict and Russia-Ukraine war,” it added.
The bank went on to point out that OPEC+ ministers meet on Sunday to set production targets. Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman decided, in a virtual meeting held on August 2, to increase their production target by almost 190,000 barrels per day in September, a statement posted on OPEC’s website that day revealed.
In a report sent to Rigzone late Wednesday, Standard Chartered Bank Energy Research Head Emily Ashford highlighted that there had been fresh military escalation in the U.S.-Iran conflict at the start of September but added that “tentative diplomacy” remained active.
“However, this has so far failed to translate into a durable resolution of the physical disruption,” Ashford pointed out in the report.
“The market is increasingly exposed to the risk that a prolonged stalemate erodes the remaining supply cushion,” Ashford added in Wednesday’s report.
“Price momentum remains to the upside, with the U.S. adding more economic sanctions, alongside renewed strikes,” Ashford continued.
“Brent blend for November delivery pushed above $97 per barrel in early trading on 2 September. It is decisively above the 200-day moving average (at $83.83 per barrel), 50-day (at $85.27 per barrel), and 20-day (at $89.82 per barrel). The 100-day at $91.54 per barrel could provide some downside protection,” Ashford went on to state.
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